Show transcribed image text You need to create a portfolio with a duration of 4 years. You can use a 3 year zero-coupon bond and a perpetuity which pays $80 each and every year forever and has yield of 8%. How much of the portfolio value in percentage you would have to invest in the zero-coupon bond, and how much in the perpetuity?
Rae deposited $5741, the earnings from her part-time job, into a savings account. If she withdraws $650 at the end of each month, how long will the money last if interest is 5.15% compounded monthly?
Rae deposited 5741 the earnings from her part time job into
Using the saving example in the text (Wendy Chan), calculate the income replacement ratio based on a deferral rate of 10% and an investment return on retirement savings of 3.5%. (All other assumed values remain the same.)
Is there a way I can avoid paying capital gian taxes on home due to my son's unforseen medical condition.?
The sales budget for your company in the coming year is based on a quarterly growth rate of 20 percent with the first-quarter sales projection at $226.3 million. In addition to this basic trend, the seasonal adjustments for the four quarters are 0, -$17.3, -$9.3, and $22.3 million, respectively. Generally, 50 percent of the sales can be collected within the quarter and 45 percent in the following quarter; the rest of the sales are bad debt. The bad debts are written off in the second quarter after the sales are made. The beginning accounts receivable balance is $105.3 million. Assuming all sales are on credit, compute the cash collections from sales for each quarter. (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Collected within quarter $ $ $ $ Collection from previous quarter $ $ $ $ Cash collections from sales $ $ $ $
Joel Franklin is a portfolio manager responsible for derivatives. Franklin observes an American style option and a European-style option with the same strike price, expiration, and underlying stock. Franklin believes that the European-style option will have a higher premium than the American-style option.
a. Critique Franklin’s belief that the European-style option will have a higher premium. Franklin is asked to value a 1-year European-style call option for Abaco Ltd. common stock, which last traded at $43.00. He has collected the information in the following table.
Closing stock price
$43.00
Call and put option exercise price
45.00
1-year put option price
4.00
1-year Treasury bill rate
5.50%
Time to expiration
One year
b. Calculate, using put-call parity and the information provided in the table, the European-style call option value.
c. State the effect, if any, of each of the following three variables on the value of a call option.
(No calculations required.)
i. An increase in short-term interest rate.
ii. An increase in stock price volatility.
iii. A decrease in time to option expiration.
. If the appropriate discount rate for the following cash flows is 11.7 percent per year, what is the present value of the cash flows?
21,600 1
25900 2
38700 3
16200 4
Ida Ho is about to retire from a government job with a pension that is indexed to the Consumer Price Index (CPI). She is 60 years old and has a life expectancy of 25 years. Estimate the current economic value of her pension, which will start at $20,000 per year. For the purpose of this estimation, assume that Ida will draw the pension for 25 years, the annual pension will be paid in a single year-end payment, the CPI will rise 2.5% per year, and money is worth 5% compounded annually. How much of the current economic value comes from indexing? View Solution:
Ida Ho is about to retire from a government job
Consider a person with the following value function under prospect theory: v(w) = w.5 when w > 0 = -2(-w) .5 when w < 0 a. Is this individual loss-averse? Explain. b. Assume that this individual weights values by probabilities, instead of using a prospect theory weighting function. Which of the following prospects would be preferred?
I'd actually like to know how to do it, so please show work? 🙂
Heer Enterprises needs someone to supply it with 225,000 cartons of machine screws per year to support its manufacturing needs over the next 7 years, and you've decided to bid on the contract. It will cost you $1,170,000 to install the equipment necessary to start production; you'll depreciate this cost straight-line to zero over the project's life. You estimate that in 7 years, this equipment can be salvaged for $75,000. Your fixed production costs will be $360,000 per year, and your variable production costs should be $12.75 per carton. You also need an initial investment in net working capital of $112,500, all of which will be recovered when the project ends. Your tax rate is 32 percent and you require a 13 percent return on your investment. What bid price per carton should you submit?
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